Federal Appeals Court Rules For Grayscale In Spot Bitcoin ETF Case

The U.S. could be on the verge of getting its first spot bitcoin exchange-traded fund after a federal court ordered the Securities and Exchange Commission to review its rejection of Grayscale Investments’ attempt to convert the Grayscale Bitcoin Trust (OTC: GBTC) into an ETF.

Grayscale Investments, the manager behind the leading cryptocurrency fund, first applied to convert its GBTC closed-end fund into an exchange-traded fund in October 2021.

Watch Ark Invest’s Cathie Wood correctly predict the overturning of the SEC’s Bitcoin ETF decision in an exclusive interview with Zenger News CEO Jason Raznick:

The SEC rejected the application, stating the application failed to answer the SEC’s questions about preventing market manipulation and other concerns. Grayscale appealed against the SEC scarcely an hour after the rejection. 

The order does not direct the SEC to approve the ETF, but to review Grayscale’s application, according to a Coindesk report. 

“The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP. In the absence of a coherent explanation, this unlike regulatory treatment of like products, is unlawful. We therefore grant Grayscale’s petition for review and vacate the Commission’s order,” said the ruling.

The court decision comes after a barrage of prominent institutions, including BlackRock, Inc (NYSE: BLK), Fidelity, WisdomTree, Inc (NYSE: WT), VanEck, Bitwise and Invesco filed applications for spot bitcoin ETFs.

Many have proposed working with the largest U.S.-based crypto exchange, Coinbase Global, Inc (NASDAQ: COIN), to police trading in the underlying bitcoin market. 

The Grayscale product has traded at a discount to the underlying asset, reaching the lows of 50% after the SEC reiterated its reasons for denying Grayscale’s application.

However, GBTC saw its discount narrow to around 25% following prominent names filing for bitcoin spot ETFs.

Analysts expected the conversion to an ETF would likely eliminate the discount of GBTC.

Produced in association with Benzinga